Russian Funds May Invest In Aramco’s IPO To Boost Oil Ties

Russian pension funds are mulling over investing in Saudi Arabia’s oil giant Aramco when it launches its initial public offering expected later this year, in a bid to boost the Saudi-Russian partnership, the chief executive of Russia’s state investment fund told Reuters on Tuesday.

“We see great interest in the Aramco IPO from Russian pension funds as well as from our Chinese partners,” Kirill Dmitriev, chief executive of the Russian Direct Investment Fund (RDIF), told Reuters on the sidelines of the World Economic Forum in Davos.

Back in 2015, RDIF and Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), announced a partnership to invest in projects in Russia, such that could strengthen trade, economic, and investment co-operation between the two countries. Under the agreement, the Saudi fund will invest US$10 billion in the partnership.

Russia and Saudi Arabia should continue to cooperate in oil policies for many more years, said Dmitriev, who was the first Russian official to suggest two years ago that Moscow should cooperate with OPEC in a joint OPEC/non-OPEC production cut pact.

Over the weekend, the energy ministers of Russia and Saudi Arabia reiterated their commitment to the production cut deal, with Saudi minister Khalid al-Falih suggesting that there was “readiness to continue cooperation beyond 2018.”

Chinese investors such as sovereign wealth funds and major state companies could also be pursuing buying into Aramco when it lists its shares. Such a move could give China a stake in the lowest-cost oil producer and major exporter of the commodity that Beijing will continue to use in growing volumes in the foreseeable future.

The planned sale of 5 percent of the oil giant could bring Saudi Arabia US$100 billion, if Saudi officials’ valuation of the company at US$2 trillion stands. Analysts value the Kingdom’s oil giant at much less, with the majority putting the valuation at between US$1 trillion and US$1.5 trillion.

Earlier this month, Saudi Arabia was said to have shortlisted New York, London, and Hong Kong for the foreign exchange for Aramco’s IPO, with the three exchanges being considered either singly or a combination of two of them, or even all three.